Market movers today
Today’s key release in the Scandis is the Swedish inflation data for December. We expect CPIF and CPIF excluding energy to print 1.6% y/y and 1.7% y/y, respectively, which is close to one-tenth of a percentage point below the Riksbank’s forecast.
We are also looking very much forward to the signing of the US-China phase 1 trade deal although the signing in itself is not a huge market mover. The signing ceremony is scheduled to take place in the White House at 17:30 CET. The 86-page agreement will also be released today. The US and China have said that now the phase 1 trade deal has been finalised, they will get started with phase 2 . We think those negotiations are going to be more complicated and think there is a 50% chance of a permanent deal ahead of the US presidential election. The good news is that we have gone from a period with trade war escalation to now de-escalation and we do not think US President Trump dares to U-turn again, as the trade war was hurting the US economy, in particular the to him very important manufacturing sector, hence damaging his re-election chances.
We also get UK inflation data for December today. Due to the high uncertainty and weak growth, focus has turned away from inflation, but if inflation comes in lower than expected, it could add fuel to the recent repricing of the Bank of England ahead of the upcoming meeting on 30 January. CPI core was 1.7% y/y in November and is expected to remain unchanged.
In the euro area, industrial production data for November is due out at 11:00 CET, which will be interesting given the weakness we have seen in the European manufacturing sector in 2019.
The US empire manufacturing index for January is due out at 14:30 CET.
We also have some Fed speeches and the Fed Beige Book although we do not expect neither of them to be very interesting.
Selected market news
Risk appetite retreated overnight with equities and bond yields sliding. Some scepticism around the US-China phase one deal crept into the markets following a period with very strong performance of equities and other risk assets. The small set-back was fuelled by a Bloomberg report that Trump would not reduce tariffs on China further on this side of the election in November. Some commentators also expressed scepticism that China would be able to buy the large amount of goods they are committing to in the phase-one deal. As we’ve said before, while the trade war has peaked we should still expect a bumpy road the trade talks but overall we expect the talks to move a bit to the background for now.
US CPI inflation released yesterday was softer than expected underlining the lack of inflation pressure in the US economy. Core CPI rose 0.1% m/m (consensus 0.2% m/m) keeping the annual increase at 2.3% y/y.
